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Carmanah logging called poor investment

Christie McLaren The Globe and Mail November 23, 1990 NB: This article has been made available through a digital conversion program, and some errors may have occurred. To view the original article in PDF form, click here.

Shareholders in the forestry giant MacMillan Bloedel Ltd. would make more money by investing in Canada Savings Bonds than they will by logging British Columbia’s disputed, Carmanah Valley, a study says.

B.C. taxpayers will also make less money from the timber harvest than politicians are leading people to be­lieve, according to the study, to be released today by Environment Probe in Toronto.

“It’s a money-loser,” Adam White, a forest economics researcher who conducted the study, said in an interview yesterday.

“MacMillan Bloedel would be better either paying off some of their own debt, or investing in something safe like government bonds,” Mr. White said. “They’d be better off. They’d make more money, risk-free.”

By cutting the Sitka spruce and smaller trees in the hotly contested watershed on Vancouver Island, MacMillan Bloedel will make total profits of less than $1-million over the next 70 years — a return on investment of just 2.4 per cent, Mr. White said.

MacMillan Bloedel officials agreed yesterday that logging in gen­eral does not bring a high rate of re­turn on investment. “A low level of return is not unusual for this indus­try or for the company,'” company spokesman Scott Alexander said in an interview.

But company and industry analysts stressed that integrated for­est-products companies such as MacMillan Bloedel may be willing to suffer low profits on logging oper­ations if they can make higher prof­its on their sawmills and pulp mills.

MacMillan Bloedel’s over-all profitability — its return on invest­ment — has ranged from 10.6 per cent last year to a low of minus 2.6 per cent in the 1982 recession, Jim Hackett, a forest analyst with the company, said in an interview. The company does not make public its calculations about the profitability of specific areas, he said.

The 40-page study — based on fig­ures supplied by the B.C. Ministry of Forests, MacMillan Bloedel, the B.C Council of Forest Industries and other sources — is the only de­tailed analysis of the economics of timber harvesting in the Carmanah Valley.

It calculated the cost to society of preserving the upper Carmanah by examining the cost of losing the opportunity to harvest the timber. (The calculations do not measure the costs of lost jobs or the lost bene­fits from wilderness tourism.)

It is the first study to suggest that , logging Western Canada’s old-growth rain forests may not be as profitable as people think. “Neither the government nor MacMillan Bloedel has done the economic anal­ysis of this,” Mr. White said.

Profits may be low because, while the spotlight focuses on the biggest, oldest and most beautiful trees, old-growth forests contain many small­er, younger, low-quality trees that bring poor prices at market. Even the biggest trees can be rotten at the core and fail to fetch top prices.

As a result, logging the upper Car­manah Valley is also a poor invest­ment for B.C. taxpayers, compared with the immeasurable benefits of preserving the unique wilderness area, the study says.

The Ministry of Forests will col­lect just $92,000 in timber royalties annually by clear-cutting the upper valley — .02 per cent of the prov­ince’s total annual revenue from timber royalties, the study says.

“It’s only going to cost the provin­cial government $92,000 a year (in timber royalties) to preserve the upper valley,” Mr. White said. “From society’s point of view, does it make sense for them to cut our trees at a loss and for us to get noth­ing from it?”

Mr. Richmond’s office did not re­turn telephone calls yesterday.

Last April, Mr. Richmond tried to defuse the dispute over the Car­manah with what he called “a bal­anced solution.” He proposed turn­ing the lower valley, which contains the tallest Sitka spruce, into a pro­vincial wilderness park, and permit­ting MacMillan Bloedel to log the upper valley pending further studies.